Meeting_Body
FINANCE, BUDGET, AND AUDIT COMMITTEE
SEPTEMBER 19, 2024
Subject
SUBJECT: AUDIT OF MISCELLANEOUS EXPENSES FOR THE PERIOD OF OCTOBER 1, 2023 TO DECEMBER 31, 2023
Action
ACTION: RECEIVE AND FILE
Heading
RECOMMENDATION
Title
RECEIVE AND FILE Office of the Inspector General (OIG) Final Report on the Statutorily Mandated Audit of Miscellaneous Expenses for the Period of October 1, 2023 to December 31, 2023.
Issue
ISSUE
The Office of the Inspector General (OIG) performed an audit of Metro miscellaneous expense transactions processed from October 1, 2023 to December 31, 2023. This audit was performed pursuant to Public Utilities Code Section 130051.28(b) which requires the OIG to report quarterly to the Board of Directors on the expenditures of the Los Angeles County Metropolitan Transportation Authority (Metro) for miscellaneous expenses such as travel, meals, refreshments, and membership fees.
Background
BACKGROUND
All Metro expenditures are categorized into various expense accounts and recorded in Metro’s Financial Information System (FIS). Metro employees have several options for seeking payment for miscellaneous expenses incurred, such as check requests, purchase cards, purchase orders, and travel & business expense reports. Each option has its own policies, procedures, or guidelines.
The Accounting Department’s Accounts Payable Section is responsible for the accurate and timely processing of payment for miscellaneous expenses.
This audit covered a review of Metro's miscellaneous expenses for the period of October 1, 2023 to December 31, 2023. For this period, miscellaneous expenses totaled $2,731,926 with 661 transactions. We selected 50 expense transactions totaling $1,631,777 for detail testing.
Discussion
DISCUSSION
FINDINGS
The miscellaneous expenses we reviewed for the period of October 1 to December 31, 2023, generally complied with Metro policies and procedures, were reasonable, and were adequately supported by required documents. However, we found five instances of noncompliance with P-card policies as well as seven instances of noncompliance with the GEN 65 Metro Business Travel Policy.
Other findings include Advertising and Corporate Membership expenses charged to incorrect accounts, as well as the P-Card program needing updates for transactions processed through CIMS.
Employees should be instructed to read and comply with Metro’s GEN 65 Business Travel Policy: Submit Travel Request/Authorization forms at least 30 days in advance of travel and provide the required and applicable justification memos. Employees should be reminded to obtain written pre-approval for P-card purchases and accurately charge expenses to the correct accounts.
RECOMMENDATIONS
We recommend the following:
Vendor/Contract Management
1. Due to the unique nature of P-Card usage by V/CM for advertising expenses related to solicitations from various departments, and their systematic approvals through Metro’s CIMS, update the P-Card program to include exceptions for systematic approvals compared to individual P-Card purchases requiring written pre-approval.
2. Coordinate with Metro’s Talent Development department and develop additional CIMS training that helps ensure all departments who prepare purchase requisitions are cognizant that advertising expenses are legally required for formal solicitations, and budget for these advertising costs.
Metro OMB
3. Provide adequate notification to department/cost Centers for possible advertising expenses who submit solicitations to V/CM for procurement and prepare a budget for possible advertising expenses. Include as part of the annual budgeting process a provision for advertising expenses related to their solicitations to avoid budget shortfalls.
Risk Management, Public Relations, Program Management Executive Office, Transit Security, System Security and Law Enforcement:
4. Remind the P-Cardholders and Approving Officials that approval of P-card transactions should be made explicitly in writing in advance of purchase and included with the supporting documentation of P-card transactions, according to the P-Card program.
Rail MOW Signal Systems, Station Experience, Management Audit Services, Facilities and Property Maintenance, Office of Strategic Innovation
5. Require the traveler and those charged with reviewing and approving travel expenses to be familiar with the Business Travel Policy GEN 65.
6. Instruct the travelers to include an explanation in their justification memo in cases where they submit a TA request less than 30 days in advance of their trip.
Management Audit Services
7. Require the traveler to submit an approved justification memo for personal vehicle use before the travel is set to begin.
Talent Development
8. Require the traveler to submit a justification memo when lodging expenses are higher than the allowable GSA per diem rate and include the approved justification memo in the supporting documentation with their Travel & Business Expense Report.
Marketing
9. Ensure that the 50918 Advertising account is budgeted sufficiently in future periods to avoid the misclassification of advertising expense transactions by using other accounts.
Community Relations
10. Remind the employees that memberships with local chambers of commerce, even those considered smaller or insignificant in amount, should be charged to the Corporate Membership account and staff should comply with the Corporate and Professional Membership Policy, HR 6.
Equity_Platform
EQUITY PLATFORM
It is the OIG’s opinion that there are no equity considerations or impacts resulting from this audit.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
Recommendations support strategic plan goal no. 5.2: Metro will exercise good public policy judgment and sound fiscal stewardship.
Next_Steps
NEXT STEPS
Metro management will implement corrective action plans.
Attachments
ATTACHMENTS
Attachment A - Final Report on Statutorily Mandated Audit of Miscellaneous Expenses for the Period of October 1, 2023 to December 31, 2023 (Report No. 25-AUD-01)
Prepared_by
Prepared by: Hovsep Khachatryan, Auditor, (213-244-7326)
Asuncion Dimaculangan, Senior Auditor, (213) 244-7311
Yvonne Zheng, Senior Manager, Audit, (213) 244-7301
George Maycott, Senior Director, Special Projects, (213) 244-7310
Reviewed_By
Reviewed by: Karen Gorman, Inspector General, (213) 922-2975